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Daily Digest 1/10 - LA In Pension Denial, Saudi Arabia Considers Adding To $10B Loan

Wednesday, January 10, 2018, 11:18 AM


Smuggled cattle and petrol join exodus from Venezuela

They bribe border guards to get the livestock across. The cows are slaughtered — as many as 250,000 a year — in makeshift Colombian abattoirs and the meat is sold for three times what it fetches in Venezuela.

Los Angeles: In Pension Denial

If the City lowered its investment rate assumption to 6.2%, the CalPERS projected rate of return, the unfunded pension liability would jump by two-thirds to $15 billion, lowering the funded ratio to an unhealthy 71%. Pension contributions would also increase by $400 to $500 million a year, blowing a hole in the City’s budget as pension contributions would devour over 25% of the City’s budget.

Saudi Arabia Considers Adding to $10 Billion Loan

The world’s biggest oil exporter plans to borrow about $31 billion this year to bridge an expected budget deficit of $52 billion and fund growth plans after its economy shrank last year. Saudi Arabia raised about $36 billion last year, including $14 billion of domestic bonds and $22 billion from international debt markets.

Shrinking balance sheet may protect Federal Reserve from losses and political criticism: Fed study

In each year since 2012, the Fed has sent between $79 billion and $97 billion in remittances to the U.S. Treasury. The payments are derived from profits on its bond holdings and, while they are projected to decline, they represent a quiet windfall for taxpayers thanks to the central bank’s unprecedented crisis-era decisions to prop up the economy by buying bonds.

Venezuela 2017 annual inflation at 2,616 percent: opposition lawmakers

Opposition politicians, whose numbers are broadly in line with analysts’ estimates, on Monday put December’s inflation figure alone at 85 percent, well into hyperinflation territory for which the benchmark is usually 50 percent.

Japan's central bank trims bond purchases, prompting taper talk

The BOJ pledged in 2016 to guide short-term interest rates at minus 0.1 percent and 10-year bond yields at around zero percent.

Group says Venezuela bonds should trade minus interest

While the Venezuelan government has vowed to stay current on its debt, it has also deferred payments into grace periods and beyond - and blamed US sanctions for the delays.
Between its sovereign bonds and the debt of state-owned oil company PDVSA, the country is late on about US$1.629bn in payments, with a good portion of it falling outside the grace periods, according to Nomura.

Is The Current Oil Price Rally A “Head Fake?” (Michael K.)

But that remains to be seen. Barclays, for its part, is skeptical. “We think that some of the incremental cash flow received from higher oil prices will filter down” to higher spending on drilling, the bank argued. If the shale industry calibrates its drilling campaign to $60 per barrel, as opposed to $50–$55 per barrel as it had previously, the result could be much higher production this year. Barclays says the U.S. could add 1.4 million barrels per day (mb/d) in 2018 compared to the baseline assumption of 1 mb/d. An extra 400,000 bpd is equivalent to nearly a quarter of the combined OPEC/non-OPEC cuts.

Gold & Silver

Click to read the PM Daily Market Commentary: 1/9/18

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